Page 328 - Marketing Management

COMPETITIVE DYNAMICS | CHAPTER 11 305

quality, and marketing expenditures. 20 Companies that attempt to increase market share by
cutting prices more deeply than competitors typically don’t achieve significant gains, because
rivals meet the price cuts or offer other values so buyers don’t switch.
• The effect of increased market share on actual and perceived quality. 21 Too many cus-
tomers can put a strain on the firm’s resources, hurting product value and service delivery.
Charlotte-based FairPoint Communications struggled to integrate the 1.3 million
customers it gained in buying Verizon Communications’s New England franchise. A slow
conversion and significant service problems led to customer dissatisfaction, regulator’s
anger, and eventually bankruptcy. 22

Other Competitive Strategies

Firms that occupy second, third, and lower ranks in an industry are often called runner-up or trailing
firms. Some, such as PepsiCo, Ford, and Avis, are quite large in their own right. These firms can adopt
one of two postures. They can attack the leader and other competitors in an aggressive bid for further
market share as market challengers, or they can choose to not “rock the boat” as market followers.

Market-Challenger Strategies

Many market challengers have gained ground or even overtaken the leader. Toyota today produces
more cars than General Motors, Lowe’s is putting pressure on Home Depot, and AMD has been chip-
23
ping away at Intel’s market share. A successful challenger brand in the beverage business is SoBe.

SoBe One of the most competitive aisles in any supermarket, grocery store, or
SoBe convenience store is the beverage aisle. SoBe’s successful launch in 1996 was a result of
shrewd planning and creative execution. Positioning against the established Snapple and
Arizona brands, founder John Bello wanted to create a smart fruit juice and iced tea alter-
native that was fun and innovative and offered added value. The first successful product
was SoBe Black Tea 3G with ginseng, guarana, and ginkgo. The lizard character on the packaging,
from an iconic South Beach hotel, became an integral part of SoBe’s brand imagery. SoBe’s explosive
growth was based on a combination of functional benefits (the 3 Gs), colorful packaging, a powerful
sales force establishing strong shelf presence in the store, and a steady stream of new products.
The slogan “SoBe Yourself” captured the brand’s challenger ethos and supported its nontraditional,
guerilla marketing appeals. SoBe Love Buses created product sampling opportunities, and sponsor-
ship of iconoclastic athletes like skier Bode Miller and golfer John Daly created buzz. SoBe was
purchased by PepsiCo in January 2001 and now offers exotic teas, fruit juices and blends, elixirs,
vitamin- and antioxidant-enhanced water (Lifewater), and sports drinks. Its name is also licensed for
gum and chocolate. 24

Challengers set high aspirations while market leaders can fall prey to running business as usual.
Now let’s examine the competitive attack strategies available to challengers. 25

DEFINING THE STRATEGIC OBJECTIVE AND OPPONENT(S) A market challenger
must first define its strategic objective, usually to increase market share. The challenger must decide
whom to attack:
• It can attack the market leader. This is a high-risk but potentially high-payoff strategy and
makes good sense if the leader is not serving the market well. Xerox wrested the copy market
from 3M by developing a better copying process. Later, Canon grabbed a large chunk of
Xerox’s market by introducing desk copiers. This strategy often has the added benefit of dis-
tancing the firm from other challengers. When Miller Lite attacked Bud Light on product
quality during the mid 2000s, Coors Light was left out of the conversation.